China: Tax deferral policies for private pensions

Tax-deferral policies for private pensions that will take effect from 1 January 2022.

Tax-deferral policies for private pensions that will take effect from 1 January 2022.

The government released Announcement No. 34 (3 November 2022) providing the tax-deferral policies for private pensions that will take effect from 1 January 2022.


The government recently announced the following measures implementing private pensions in China:

  • Participation and contributions:
    • Eligible participants include Chinese citizens covered by basic pension insurance for the urban working group or basic pension insurance for urban and rural residents.
    • Participation is voluntary, and participants’ contributions are credited to their personal accounts.
    • The annual contribution may not exceed RMB12,000 per person, and contributions can be paid monthly, by installments, or annually.
  • Investment options: 
    • Participants can decide on how their contributions may be invested, which could be term-deposits, wealth management products, commercial pension insurance policies, mutual funds, and others.
  • Withdrawals:
    • When certain conditions are met, participants can withdraw from their private pension accounts on monthly basis, by installments, or in one lump sum.

Tax deferral policies

Announcement No. 34 sets out the following tax-deferral policies for private pensions:


Preferential tax treatment



  • Deductible against comprehensive income or business operation income before taxation
  • Deduction limit: RMB 12,000 / year
  • Method: Tax deduction can be claimed on one’s monthly individual income tax withholding return or via annual self-declaration tax return for individual who receives employment income
  • Supporting documentation for tax deduction claim: certificate issued by the private pension information administration platform

Investment (for returns accrued)

  • ·   Tax-exempt
  • N/A


  • Not aggregated with one’s comprehensive income
  • Tax rate: 3%
  • Tax withholding agent: Financial institutions with which the private pension account is established

The tax deferral policies for private pensions set out in Announcement No. 34 differ from the tax deferral policies under the tax-deferred individual commercial pension insurance plans piloted since 2018 in Shanghai, Fujian province (including Xiamen), and Suzhou Industrial Park (e.g., the tax rate on distributions was reduced from 7.5% to 3%). According to Announcement No. 34, regions that have piloted tax-deferred individual commercial pension insurance must align the tax deferral policies of those plans with the new rules for private pensions from 1 January 2022.

KPMG observation

The list of regions that may implement private pensions is expected to be released soon. Other issues concerning the implementation of the new regime (such as which commercial banks may provide private pension services and what private pension products may be available) is expected to be confirmed and addressed in the future.

For more information, contact a KPMG tax professional:

David Ling |


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